Though in many cases a departing employee would be better served obtaining subsidized insurance on the Obamacare exchanges, employers are still required to inform departing employees and their qualified beneficiaries of the option to extend their company-based health insurance based on the circumstances of their departure.

Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), employers with 20 or more full-time employees are required to offer continuation of health coverage for a limited time to employees and their dependents who lose coverage due to a qualifying event.

A qualifying event could be a termination for other than gross misconduct or a loss of coverage due to a reduction in hours, along with five other events (such as death, divorce, etc.).

The issue was brought home in a recent court decision (Morehouse v. Steak N Shake, Inc.) when the employer, who failed to send a notice of COBRA eligibility to a qualified employee and spouse and dependents, was fined and ordered to pay the employee’s legal fees, along with all medical expenses minus the premium portion that the employee would have been obligated to pay.

The case was decided in the U.S. District Court for the Southern District of Ohio.